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Tax relief can be claimed on life insurance premium paid for specified persons only

Are you paying to insure someone else? did you forget to file taxes in the last year? Read on to know the tax implications of these, and more


Photo by: Hemant Mishra/Mint
Photo by: Hemant Mishra/Mint

My maid’s husband passed away a few years ago. There was no insurance in the family. Subsequently, I bought a term life insurance policy on her with her only daughter as the beneficiary. I have been paying her premiums for the past 2 years. Can I claim any deduction on it?

—Shailaja Singh

The life insurance premium payment or contribution in the name of specified persons qualifies for tax deduction subject to the overall limit of Rs1.5 lakh per financial year (FY) under section 80C of the income tax laws.

The specified persons include self, spouse and any child of such individual. Since your maid is not covered under the definition of specified persons, you cannot claim tax deduction in respect of life insurance premium paid on her behalf.

I have been working for about 3 years now, but have not filed tax returns ever. Can I file them all now?

—Dashmesh Saha

Under the Indian tax law, it is mandatory for an individual whose total income exceeds a specified income threshold or holds assets outside India to file his personal income tax return (ITR) within the applicable due date. The ITR filed after the specified date is considered as belated tax return.

As per the erstwhile provision, the belated ITR for a particular FY could be filed within 2 years from the end of the relevant FY.

Accordingly, you will be able to file a belated ITR for FY15 and FY16 by 31 March 2017 and 31 March 2018, respectively. The due date for filing ITR for FY17 would be 31 July 2017.

The aforesaid timeframe relating to filing of belated ITR has been amended (Finance Act 2016) with effect from FY 2016-17. According to this, a belated return for FY17 onwards has to be filed within one year from the end of relevant FY.

Accordingly, you will not be able to file belated tax returns for the earlier years (up to FY14). With respect to belated tax return, though tax on earned income during an FY has been entirely deducted at source, it has the following shortcomings:

l If any taxes are payable on the income on which tax is not deducted at source, interest at per specified rates would be applicable.

l The tax officer may levy a penalty of Rs5,000 for not filing the tax return within the specified dates if it’s not filed within a year from the end of the relevant FY.

l You cannot subsequently revise the tax return even if you discover an omission or a mis-statement in the original tax return filed; and

l The losses incurred in the respective FY (except for house property loss and business loss on account of un-absorbed depreciation and capital expenditure on scientific research) cannot be carried forward to subsequent FYs to offset against corresponding income streams.

My wife and I received gifts in the form of cash from our relatives and friends on our marriage in January. It totaled to around Rs75,000. Do we have to show this in our tax returns?

Konark Singh

Any sum exceeding Rs50,000 received by an individual during a FY without or for inadequate consideration, is taxed as ‘income from other sources’ in the hands of the recipient. An exemption is allowed if the sum is received from a relative or on the occasion of marriage as per section 56 of the Act.

So, the amount of gift that you have received on your wedding day shall not be taxable as income in your or your wife’s hands. This can be claimed as exempt from tax.

Parizad Sirwalla is partner (tax), KPMG.

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